OneMain ordered to pay $20M in refunds, penalties
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The Consumer Financial Protection Bureau has ordered Evansville-based OneMain Financial to pay $20 million over what it called deceptive sales practices.
The bureau said OneMain, a personal loan installment lender, failed to refund interest charged to 25,000 customers who canceled purchases within what the company called a full refund period. OneMain was also accused of deceiving borrowers about need to purchase add-on products to receive a loan.
OneMain, a subsidiary of OneMain Holdings Inc., operates more than 1,400 branches in 44 states. The company employs some 9,200 people, according to its most recent annual report.
The CFPB said the company makes extra profits off its loans by upselling borrowers on products, including roadside assistance, unemployment coverage and identity theft coverage. The bureau said OneMain employees were incentivized to upsell borrowers on every loan, and salespeople could be fired if they didn’t upsell enough.
An investigation found that some customers were led to believe they couldn’t receive a loan without signing up for an add-on product. Borrowers were also told they could receive a full refund on add-on purchases if they cancelled within a certain period.
However, the bureau said OneMain kept about $10 million in interest charges attributable to the add-ons canceled within the refund period.
The CFPB said OneMain’s actions were in violation of the Consumer Financial Protection Act of 2010.
“OneMain pressured its employees to load up its loans with extra charges through false promises of easy cancellation with full refunds,” CFPB Director Rohit Chopra said in a news release Wednesday. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices.”
Per the order, OneMain will pay $10 million in refunds to customers and a $10 million penalty to the CFPB’s victims relief fund.
In a statement posted to the company’s website, OneMain said it is pleased to resolve the matter, but disagreed with the CFPB’s conclusions.
“OneMain has agreed to issue interest refunds to the fewer than 1% of our customers who, within the last four years, received a refund of their premium or fee through a check rather than a statement credit after canceling an optional product within 30 days of purchase,” the company said. “We are deeply committed to our customers and doing things the right way. This resolution is consistent with our mission of improving the financial well-being of hardworking Americans.”
In addition to the $20 million, the bureau ordered OneMain to adjust its policies to make cancellation of add-on products easier by doubling the refund period from 30 to 60 days and include interest in any refunds issued.
OneMain said it would extend the refund period for all optional products customers who cancel.
“Many of the enhancements identified in the Consent Order have already been in place at OneMain for years, and the remainder have been completed, or are expected to be completed this year,” the company said.
The bureau added that OneMain must take measures to ensure future compliance.